As if budgeting wasn’t hard enough by itself sometimes life gets real… like really real and you have to end up cutting back more than you ever intended to. Maybe your car had some unexpected expenses this month, maybe it’s medical bills, or you got laid off etc.

Sometimes things happen and we are left with no choice but to adjust. In situations like these, we are forced to create a bare bones budget.

A bare bones budget is a budget that only leaves room for the essentials. It usually cuts out things like eating out, entertainment costs, travel etc in order to save as much money as possible. This type of budgeting was never meant to be a long-term strategy but to be utilized in extreme cases.

If you are facing some unexpected financial crisis then this would be an excellent strategy for you. Maybe you just want to challenge yourself to see how low you can get your expenses, either way there are a few things you need to do to prepare to live off a bare bones budget

Want to practice sticking to a bare bones budget this week? Take the 50 dollar spend challenge and see if you could do it!

Step 1: Figure out your projected income for the month

If you already know this number then that’s great, but if you don’t then you must get an accurate picture of how much money you expect to bring in this month. If you’re an hourly or salary worker then take a look at your past pay stubs to see how much money you made last month. If you can expect your work weeks to look pretty similar for this upcoming month then use this number as a base for the budget.

If you are a freelancer or your income has more variability to it then take a moderate estimate by looking at work you have coming up, continuing jobs, and any deals that you are more than 90% sure you will be able to close. Be very moderate here. You don’t want to over estimate this number and then not have enough money allocated to take care of your obligations.

Step 2: Subtract 10% of your projected income

Yes. After you understand how much money you are expecting to make for this month immediately plan to take 10% of it away and stash it in an account that you will not touch for this month. Chances are, if you are on a bare bones budget, then you might have a cash flow problem that needs to be handled. Even on the strictest budgets you have to leave room to pay yourself. Call this your peace of mind fund. As this account grows, it will do just that, give you peace of mind knowing that should something go wrong again you will not have to go into debt or make drastic lifestyle changes until you are able to get a handle on the situation. You always want to make sure you are steadily building this fund or at the minimum maintaining it.

Step 3: Write down every financial obligation you have for the month

Now that you have a good estimate of how much money you will have coming in this month. Next you need to figure out your financial obligations for this month. This means everything. Grocery money, every fill up at the pump, your monthly payments on any bills or debt, every dollar that has to be spent to fulfill an obligation write it down. Remember we’re only counting absolute needs here. So your weekly manicure, happy hour, and extra guac at chipotle aren’t going to make the cut. You want to understand exactly how much money you need to make this month to cover your bare essentials. This is so important because going forward every dollar needs to have a purpose. Nothing should go uncategorized or misc. You don’t have room for that! So count your coins.

Step 3: Compare your numbers from Step 1 and Step 3

Ok simple math here. Take the number that you are expecting to bring in as income this month (remember this is after taking out that 10%) and subtract your projected expenses. Write this number down. If you have a negative number, then we might have to take a different approach (see Step 5). If you do indeed have a positive number, then write this number down. Depending on how well you stick to your bare bones budget you might need to use these funds and you don’t realize it yet. Plus, there is also the possibly of an unexpected expense, so don’t make any crazy plans for these funds.

Step 4: Plan ahead

Ok so we know this budget isn’t going to be easy but we can make it easier to manage by taking an inventory of the things that we already own. Know everything that you have in your pantry, refrigerator, freezer etc. before going grocery shopping this week. See if you can make any meals out of the food you already have in the house before you go out to by more. Use anything that is about to go bad first and measure out ingredients you already have to avoid over spending.

Do the same thing for everything else you plan on purchasing this week. Check your gas to see how much you need to fill up this week. Take in consideration any one off payments that might occur this month like an annual bill. Planning ahead will keep impulse buying at a minimum.

Step 5: Earn some extra money

If you go through this entire process and you just can’t seem to get your expenses lower than your income then there is only one other option. Make some extra cash. Get creative and figure out how you can bring in a few extra bucks this month. You can pick up side gigs by driving for uber, doing freelance work on fiverr or selling old goods on offer up. The fact is that you can only penny pinch but so much, at some point, you have to pivot to focus on earing more money. A long-term play on this would mean getting a raise in your current position, booking more clients, or raising your prices. Whatever the case maybe increasing your income is always a great solution to a cash flow issue.

Having to stick to a bare bones budget sucks, but it can teach you some valuable lessons while you’re going through the process. Whether you take on a bare bones budget as a challenge or a necessity it will definitely teach you something!